Vietnam's Prime Minister Nguyen Tan Dung has announced to stop piloting two "state-owned economic groups" and switch them back to corporation models due to their ineffective operations during the last two years.

According to the government, the Vietnam Industry Construction Group (VNIC) and the Housing and Urban Development Group (HUD), both established in January 2010, have been unable to achieve their original goals of becoming large construction groups to control the domestic property market and compete abroad.

The "state-owned group" is an economic model that has been implemented by the government since 2005. Under this model, companies related by capital or by cooperation on projects were grouped together to create larger corporations that could theoretically dominate the entire domestic industry and compete on the global market.

After the latest decision on the two groups, Vietnam still have nine state-owned groups operating in all of the country's major industries: rubber, shipbuilding, mining, electricity, textiles and garments, insurance, chemicals, oil and gas.

Pham Viet Muon, vice chairman of the government office, said the two failed state groups, which had been formed by the re-organization and combination of 11 separate corporations under the Construction Ministry, have turned out to be impractical and not appropriate given the current market situation, news website VnEconomy reported October 3.

VNIC's key company, Song Da Corporation, and HUD's key company, the Housing and Urban Development Corporation, were "under-developed" over the last two years, said Muon.

After the two pilot groups close, their contracts will be passed to Song Da Corporation and the Housing and Urban Development Corporation.

Their former subsidiaries will operate as single corporations under the management of the Ministry of Construction, he added.